GMR Energy to finalise sale of 220 MW gas plant

A subsidiary of the diversified GMR Infra, GMR Energy Limited (GEL) had entered into a memorandum of undertaking with an external party for sale of its 220 MW gas based power plant for $ 63 million. It is in the process of entering into a definitive agreement to conclude the sale.

The move to divest the stake comes in the backdrop of lower supplies of natural gas to various power generating companies in the country, including that of GMR Energy and those under the GMR portfolio.

The shortage of gas supplies has had adverse impact on not just the gas plant but also the company finances.

Due to shortage of gas linkage, GMR Energy Limited has not generated and sold electrical energy since April 2013. The other two entities of GMR Vemagiri Power Generation Limited and GMR Rajahmundry Energy Limited, are also facing fuel linkage concerns. The latter two emerged as successful bidders in the auction process of the Ministry of Power and operated on an intermittent and truncated basis from August 15 and October 2015 respectively till September 2016.

All these entities are incurring losses due to shortage of gas, necessitating the company to consider stake sale and explore other options, with a view of free up funds and pay up debt, which is sapping the company profitability.

GMR had informed about the company concerns due to fuel linkages impacting its power plants, and thereby its financials.

GREL ISSUE

GREL has not commenced commercial operations pending linkages of natural gas supply. The consortium of lenders have decided to implement Strategic Debt Restructure Scheme under the Reserve Bank of India framework for revitalising distressed assets.

The lenders collectively hold 51 per cent of the equity share capital in such assets, which is due to conversion of debt outstanding into equity and bring about flexible restructure of balance debt after corrective plan comes through.

Debt of ₹ 1309 crore and interest of ₹ 105 crore was converted into equity shares of GREL in May 2017 for 55 per cent stake and the company had extended a guarantee of ₹ 2738 crore.

Under the SDR, lenedrs had to find a strategic buyer by June , 2017. The lenders sought extension by months, but the RBI refused extension. The lenders and the management are exploring other options.

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